Problem Description: Tims Candle Company (TCC) manufactures specialty candles. During the current month, 3 different jobs were active. These consist of:

Job A, which started the period with $200 in material cost already assigned, and

Jobs B and C which were started during the period.

The factory started the month with no finished candles.

TCC uses job costing and charges manufacturing overhead variances to COGS.

TCC assigns overhead based on direct labor hours. Use the following information to estimate manufacturing overhead rates:

Tim estimates that TCC will use 3 full-time (2,000 hours each) candle makers this year.

Tim predicts total overhead for the year to be $42,000.

Common information:

Total factory payroll for the month was $10,000. Any labor that is not charged to jobs is indirect labor. The average wage rate for direct labor workers is $15/hour. Job ticket totals for the month show the following direct labor hours for the jobs:

Job A 100 hours

Job B 250 hours

Job C 180 hours

Wax is considered a direct material and dye is considered an indirect material. The average cost of wax is 250 pounds for $1,250. Wax is issued to production in 1 pound increments.

The factory started with 250 pounds of wax and 4 packets of dye in raw materials

One 250 lb. shipment of wax was received during the month

3 packages of dye were issued to production. Each cost $150.

Direct material (wax) assigned to Jobs B and C is as follows:

Job B 196 lbs.

Job C 150 lbs.

Utilities for the month were $300. Tim estimates 75% of the utilities are for the factory.

Factory depreciation and other indirect manufacturing costs considered overhead total $2,010.

a. Make the journal entry for assigning Manufacturing overhead to all jobs.

b. Job A and Job B were completed during the month. (Job C was incomplete at the end of

the month).

c. Job A was shipped during the month.

Close out the manufacturing overhead variance account for the month.

Required:

Using the above information, in Excel (formatted so that it fits cleanly on one or several worksheets):

Prepare the journal entries for steps 1 6.

Show the T-accounts and calculate the ending balances for raw materials,

work-in-process, finished goods, cost of goods sold and manufacturing overhead.

Was overhead over-applied or under-applied? Explain (1) what factors might affect TCCs choice of an allocation base, and (2) how could TCC improve their estimate?